Introduction to Fintech companies in India
April 07, 2021
With the rapid advent of “digital” in India since the past few years, it has increasingly become easier to access financial services. A widely used term in the new digital age, fintech, has contributed to the changing patterns of consumer banking. Around the year 2015, India saw a boom in technology adoption in financial services. According to Research and Markets, in 2019, the Fintech companies in India was valued at Rs 1,920 Bn and is expected to reach Rs 6,207 Bn by 2025, expanding at a CAGR of 22.7%.
Even at an early adoption stage, fintech in India is paving the way for financial inclusion for the huge sector of unbanked and under banked population by weeding out challenges like high cost of traditional banking services. It is serving as a catalyst in the payments network, which is proving advantageous for small borrowers, SMEs, MSMEs, rural entrepreneurs, self-help groups and end users. Fintech has a critical role to play in breaking barriers of high-cost traditional banking.
The Fintech Ecosystem:
Let us deconstruct the various players in a fintech ecosystem and how they are inter-linked to Fintech solution providers.
- Investors – Venture Capitals, angel investors and private equity houses are considering fintech providers as the next golden goose.
- Traditional financial institutions – Banks and financial service providers are devising ways to collaborate with fintechs to leverage the technological advent as well as to reduce cost of operations
- Government and regulators – Suitable laws protect the end users as well as lay the guidelines for fintechs to operate within set parameters
- Universities and research institutions – The acute shortage of talented and equipped workforce is being met by institutes with a curriculum that focuses on fintech companies in India
- Incubators – Several established companies are setting up incubators for fintechs in India to experiment and develop their services.
- Users – The end user remains the most important cog of the fintech wheel. The increased adoption and acceptance by Indians are paving the way for more fintech companies in india.
While the rural population has been unwilling to accept fintech due to lack of exposure, urban India is aggressively adopting it. However, in the last few years there have been Government initiatives like Aadhaar for eKYC, UPI for payments, e-wallets for transactions, sound-wave-based payments for rural consumers which have helped bridge a huge gap. The adoption of these innovations highlights the fact that India is building a cost-effective, large-value, fintech-driven ecosystem that is focused on urban as well as rural segments. Fintechs companies in India have been transforming the narrative for financial inclusion by focusing on cost of financial services, accessibility of services, information incongruence, and lack of verifiable ID.
FinTech Innovations in India:
- Payment Services – Payments are a lot easier now. You can have a multitude of payment wallets without the lengthy procedure of opening a bank account. All you need is a smartphone and a mobile sim and you can buy almost everything within the wallet limit. Players like PayTM, Freecharge and MobiKwik have completely disrupted the Indian payment scenario. Physical wallets are no more a necessity when you go out. Just carry your phone and scan away!
- Digital Lending – Fintech innovation is being leveraged to create a space in lending. Traditionally, customers have to go through long cycles and paperwork to get a loan. Prominent companies like Union Bank of India, Profectus Capital, Bank of India, UCO Bank, SIDBI etc. are changing the age-old method. Customers without steady employment, bank account statements can also avail loans now. Fintech is opening up a host of lending models such as flow-based, vertical-based and ecosystem-based lending.
- Insurance – Another sector going the paperless way is Insurance. Aggregators like Policybazaar and Coverfox have emerged which help consumers choose among host of service providers by comparing their offerings and purchase the most suitable one.
- Savings & Wealth Management – Fintechs like Scripbox and Funds India help individuals save and invest their money. These platforms provide comparable options to choose from.
- Remittances – Oxigen and Payworld are among the notable remittance platforms which have made inward and outward remittances simple and cost effective.
- Point-of-Sale – Fintechs in this segment provide card swipe machines to enable cashless payments. Demonetization has given rise to new players like Mswipe, PineLabs, ICICI Merchant Services in this segment which has made the market competitive.
- Regtech – Providers in this segment help firms meet industry compliance rules like Anti-Money Laundering and Know Your Customer protocols to fight fraud. Notable players IDfy, Avantis, FixNix, Signzy are enhancing the regulation processes.
How are FinTechs companies in india reshaping the financial services landscape?
- The topmost barrier to traditional banking is high cost which has left the larger chunk of population unbanked or underbanked. Fintechs are here to disrupt that by eliminating expensive physical networks, outdated legacy operations, IT systems and creating a lean operating model.
- The traditional banking ecosystem has been very homogenous with almost similar offerings and service charges. Fintechs provide a scope of diversifying the services and personalizing to cater to all strata.
- The fintech companies in india has developed advance methods for risk assessment leveraging emerging technologies such as Blockchain, Artificial Intelligence and Big Data Analytics. The credit requirement scenario can be changed to penetrate into remote areas.
- Fintech innovation aims to create superior financial products, enhance customer experience and increase transparency.
The Way forward
Fintech companies in india are emerging at a very fast pace. At this juncture our primary focus should be on financial inclusion to alleviate the poor and help bring balance to the economy along with regulatory support from the Government of India.